Monthly Archives: July 2016

Airlines’ Revenue Estimation – Why Airports Just Cannot Afford to Do It Wrong

Several Airports are using estimations of airlines’ revenue to sharpen their marketing efforts and to better prepare for periodic consultation meetings with airlines.

By identifying revenue opportunities for their customers, airports can better direct their marketing activities towards prospects that are likely to benefit from increased revenue. What is more, the insight they gain will give them better leverage power when re-discussing standing agreements with airline customers.

Precise assessments of revenues and costs are essential to estimate earnings. However, while costs can fairly easily be estimated from airlines’ annual report (or indirectly from third parties CASK/CASM evaluation), revenue estimation represents a real challenge. The main reason behind it being the dramatic fluctuations of airlines’ fares across different departures. On top of that, one should consider that fares usually vary even on the same departure date when looking at different day-before-departures. Airfare fluctuation eventually results in a considerably high degree of volatility.

Revenue estimation is certainly no task for the faint-hearted! In this white-paper we will discuss how to overcome some of its greatest challenges.

The below illustration shows the degree of volatility/ risk associated to the route CPH-LGW.

Source: Infare.com

On the Y-Axes, volatility is represented in terms of standard deviation (%), while on the X-Axes the considered departure dates are listed. Each single point in the illustration mirrors volatility across days-before-departure for a given departure.

 

Article source: atn.aero.